Optional spend is key to recovery

The recession will hit profits at easyJet, my favourite airline: http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6919684.ece

No big surprise, many people are flying less and are more price sensitive. It's good that they are surviving at all. They blame rising unemployment and cost pressures for their expected profit drop in the months ahead, but one of the main problems is that flying is one of the easiest areas to reduce expenditure. Travel bans on staff in many companies appeared early in the recession, and many are still in place. Conference businesses are seeing large drops in attendance too, since it is easy to abort conference attendance when money is scarce.

Businesses that depend on optional expenditure are mostly the first to suffer and the last to recover in a recession. There are notorious exceptions of course. Providers of small luxuries benefit as people opt for small treats, and takeaway restaurants benefit at the expense of more expensive sit-in restaurants. But areas like holidays and conference trips offer big financial savings at low emotional cost, so are attractive targets for cuts.

There are many areas that indicate the start of recovery, such as manufacturing equipment sales and retailing. The sign that recovery is well under way will be when the markets for airlines and conferences pick up. That shows that people and companies are happy to loosen their purse strings for business-as-usual.